3 Things You Should Know About Medicaid

Few crises are more stressful than those related to health and long-term care. Figuring out how to sustainably support necessary home care, medical services, nursing home costs, and other critical expenses can easily become overwhelming.

And, the situation is exponentially worse if you’ve waited until you’re in crisis to address the important questions of how to pay for critical services, protect your assets, and ensure your comfort, security, and quality of life.

In fact, waiting until it’s too late is the biggest mistake older adults make when it comes to planning for ongoing home care or long-term care in a nursing home or other facility.

In many cases, people tend to put off this important task because they just don’t know where to start. And that’s understandable – Medicaid can be very confusing!

It’s likely that you’ll have many questions about qualifying and applying for Medicaid as the process can be a complicated one. Additionally, there are a lot of misconceptions about Medicaid. For example, many people don’t realize that Medicaid does cover home care.

To help you better understand the Medicaid process, read on for an overview of how to establish Medicaid eligibility, protect your assets, and successfully complete the absolutely grueling process of submitting a Medicaid application. And, remember Czepiga Daly Pope & Perri is also here to help walk you or loved one through the Medicaid planning and application process and work with you to ensure a positive outcome.

Establishing Medicaid Eligibility – There are a lot of rules.

Many people mistakenly assume that you have to be completely broke to qualify for Medicaid. This isn’t true. There are, however, very specific rules you need to adhere to in order to establish Medicaid eligibility.

Keep in mind that it is challenging to succinctly summarize Medicaid rules as they vary based on whether you’re married or single and where you live, but here are some of the main Medicaid eligibility rules in Connecticut:

There are income and asset limits. An individual Medicaid applicant must have assets of no more than $1,600, and income of no more than $2,829 per month.

There are nuances to this rule, however, that many people overlook. For instance, in most cases, an applicant’s home and car do not need to be counted as assets. In the case of real estate, as long as there is a good faith effort to sell the property during the Medicaid application process, the state will consider the property as an “inaccessible asset.”

The cash surrender value of life insurance policies is excluded if the total face values of the policies don’t exceed $1,500.

Another example of something people often overlook is the ability to “spend down” assets by paying for care or other needs. Acceptable expenses in a spend-down strategy include things such as:

eyeglasses
dental work
home improvements (grab bars, wheelchair ramps, even adding a bathroom to the first floor)

Applicants are also allowed an irrevocable burial contract up to $10,000. This document needs to be structured and written in a particular way, but it’s a smart way to put aside money to cover final expenses while also helping ensure eligibility for Medicaid.

The state presumes that jointly-held assets are owned solely by the applicant, which means the state considers the entire value of the account as owned only by the Medicaid applicant, even if another name is on the account.

For married couples, the total assets of the spouse at home (community spouse) must be evaluated on the Date of Institutionalization, which is the date that the Medicaid applicant first needed the long-term care.

What is not allowed is giving away assets within the 5 years prior to applying for Medicaid. This is because Medicaid has what’s called a “look-back” period that requires disclosure of five years’ worth of financial statements including all accounts (checking, savings, money market, stocks, bonds, CDs, retirement accounts, annuities, trusts, cash value in life insurance policies, and more). Any assets given away in the five years prior to a Medicaid application can trigger a Medicaid penalty period. More specifically, as of 2024, for every $14,524 you give away, there’s an ineligibility or penalty period of one month.

Protecting Your Assets – You have options.

You have worked hard for your money, it only makes sense that you’d like to preserve as much as you can for you and your family. Even when you are applying for Medicaid and need to adhere to strict income and asset limitations, there are things you can do to protect your assets.

Like with most Medicaid-related things, timing is of the essence. The sooner you act, the better off you’ll be.

One of the most common tactics for preserving assets without jeopardizing Medicaid eligibility is to transfer funds into a Medicaid irrevocable trust or asset protection trust. This is a legally enforceable arrangement that allows you to transfer property to someone else (the trustee), who holds the property for family members, typically children.

There is a tradeoff since neither you nor your spouse can be beneficiaries of this trust, and you cannot amend or revoke it. However, it does offer a fairly flexible way to maintain some level of control over the trust (in terms of assigning beneficiaries and trustees). It can also be written to allow for life use or use and occupancy of a residence, for example; and additionally gives you the option to sell property under the personal residence capital gains tax exclusion. Speaking of taxes, there are also substantial tax benefits for this kind of trust.

Completing the Medicaid Application – Yes, it’s a bear.

Last but not least, we come to actually applying for Medicaid. Without exaggerating, it’s fair to say that this is a complicated process that requires extreme caution and attention to detail.

Although it is always better to plan ahead, especially when it comes to asset protection, in the case of applying for Medicaid, you usually do so because the need for care is right now. Thus, to apply for Medicaid, you will need to be eligible to apply and must need the care at the time of the application.

Additionally, there is lots of paperwork you’ll need to collect including but not limited to life insurance policies, car registration, health insurance cards, power of attorney, birth and marriage certificates, bank statements from the last 5 years, and more! And, you’ll also need to complete all Department of Social Services (DSS) forms and apply to your regional DSS office.

Lastly, beware! There are many companies that claim to be able to process Medicaid applications at a low cost, but these non-attorney providers actually cause their customers great harm—putting Medicaid applicants at risk for a number of serious issues including denial of eligibility, severe tax liability, loss of spousal assets, and other unpleasant situations that may threaten the client’s life savings and other assets. Similarly, while it’s also possible to apply on your own, doing so can put your eligibility and assets at risk. Ultimately, a misstep in the application process can have severe and irreversible financial and other consequences.

Therefore, we strongly recommend working with a qualified Connecticut elder law attorney. Qualifying and applying for Medicaid is a complicated process that is best done with the hands-on assistance of an elder law attorney who has full knowledge of all the laws and how to navigate the process.

Don’t Feel Like You Have to Do This Alone

The bottom line is that you do not have to do this alone! Reach out to our team here at Czepiga Daly Pope & Perri to help take the burden off of you.

We can help you develop strategies for asset protection and long-term care planning, navigate Medicaid rules and eligibility for your loved one, and can actually do the Medicaid application for you, as we have a team of highly experienced staff who focus solely on Medicaid applications. They have an impressive track record and would be happy to take it off your hands.